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G.R. No. L-6913 November 21, 1913

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,vs.GREGORIO DE LA PEA, administrator of the estate of Father Agustin de la Pea, defendant-appellant.

J. Lopez Vito, for appellant. Arroyo and Horrilleno, for appellee.

MORELAND,J .:

This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awardingto the plaintiff the sum of P6,641, with interest at the legal rate from the beginning of the action.

It is established in this case that the plaintiff is the trustee of a charitable bequest made for theconstruction of a leper hospital and that father Agustin de la Pea was the duly authorized representativeof the plaintiff to receive the legacy. The defendant is the administrator of the estate of Father De la Pea.

In the year 1898 the books Father De la Pea, as trustee, showed that he had on hand as suchtrustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the same year hedeposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortlythereafter and during the war of the revolution, Father De la Pea was arrested by the military authoritiesas a political prisoner, and while thus detained made an order on said bank in favor of the United States

Army officer under whose charge he then was for the sum thus deposited in said bank. The arrest ofFather De la Pea and the confiscation of the funds in the bank were the result of the claim of the militaryauthorities that he was an insurgent and that the funds thus deposited had been collected by him forrevolutionary purposes. The money was taken from the bank by the military authorities by virtue of suchorder, was confiscated and turned over to the Government.

While there is considerable dispute in the case over the question whether the P6,641 of trust fundswas included in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the caseleads us to the conclusion that said trust funds were a part of the funds deposited and which wereremoved and confiscated by the military authorities of the United States.

That branch of the law known in England and America as the law of trusts had no exact counterpartin the Roman law and has none under the Spanish law. In this jurisdiction, therefore, Father De la Pea'sliability is determined by those portions of the Civil Code which relate to obligations. (Book 4, Title 1.)

Although the Civil Code states that "a person obliged to give something is also bound to preserve itwith the diligence pertaining to a good father of a family" (art. 1094), it also provides, following theprinciple of the Roman law, major casus est, cui humana infirmitas resistere non potest , that "no one shall

be liable for events which could not be foreseen, or which having been foreseen were inevitable, with theexception of the cases expressly mentioned in the law or those in which the obligation so declares." (Art.1105.)

By placing the money in the bank and mixing it with his personal funds De la Pea did not therebyassume an obligation different from that under which he would have lain if such deposit had not beenmade, nor did he thereby make himself liable to repay the money at all hazards. If the had been forciblytaken from his pocket or from his house by the military forces of one of the combatants during a state ofwar, it is clear that under the provisions of the Civil Code he would have been exempt from responsibility.


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The fact that he placed the trust fund in the bank in his personal account does not add to hisresponsibility. Such deposit did not make him a debtor who must respond at all hazards.

We do not enter into a discussion for the purpose of determining whether he acted more or lessnegligently by depositing the money in the bank than he would if he had left it in his home; or whether hewas more or less negligent by depositing the money in his personal account than he would have been if

he had deposited it in a separate account as trustee. We regard such discussion as substantially fruitless,inasmuch as the precise question is not one of negligence. There was no law prohibiting him fromdepositing it as he did and there was no law which changed his responsibility be reason of the deposit.While it may be true that one who is under obligation to do or give a thing is in duty bound, when he seesevents approaching the results of which will be dangerous to his trust, to take all reasonable means andmeasures to escape or, if unavoidable, to temper the effects of those events, we do not feel constrainedto hold that, in choosing between two means equally legal, he is culpably negligent in selecting onewhereas he would not have been if he had selected the other.

The court, therefore, finds and declares that the money which is the subject matter of this actionwas deposited by Father De la Pea in the Hongkong and Shanghai Banking Corporation of Iloilo; thatsaid money was forcibly taken from the bank by the armed forces of the United States during the war ofthe insurrection; and that said Father De la Pea was not responsible for its loss.

The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by hiscomplaint.

Arellano, C.J., Torres and Carson, JJ., concur.

G.R. No. 4015 August 24, 1908

ANGEL JAVELLANA, plaintiff-appellee,vs.

JOSE LIM, ET AL., defendants-appellants.R. Zaldarriaga for appellants.B. Montinola for appellee.

TORRES, J. :

The attorney for the plaintiff, Angel Javellana, file a complaint on the 30th of October, 1906, with the Courtof First Instance of Iloilo, praying that the defendants, Jose Lim and Ceferino Domingo Lim, he sentencedto jointly and severally pay the sum of P2,686.58, with interest thereon at the rate of 15 per cent perannum from the 20th of January, 1898, until full payment should be made, deducting from the amount ofinterest due the sum of P1,102.16, and to pay the costs of the proceedings.

Authority from the court having been previously obtained, the complaint was amended on the 10th ofJanuary, 1907; it was then alleged, on the 26th of May, 1897, the defendants executed and subscribed adocument in favor of the plaintiff reading as follows:

We have received from Angel Javellana, as a deposit without interest, the sum of two thousand sixhundred and eighty-six cents of pesos fuertes , which we will return to the said gentleman, jointly andseverally, on the 20th of January, 1898. Jaro, 26th of May, 1897. Signed Jose Lim. Signed:Ceferino Domingo Lim.


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That, when the obligation became due, the defendants begged the plaintiff for an extension of time for thepayment thereof, building themselves to pay interest at the rate of 15 per cent on the amount of theirindebtedness, to which the plaintiff acceded; that on the 15th of May, 1902, the debtors paid on accountof interest due the sum of P1,000 pesos, with the exception of either capital or interest, had thereby beensubjected to loss and damages.

A demurrer to the original complaint was overruled, and on the 4th of January, 1907, the defendantsanswered the original complaint before its amendment, setting forth that they acknowledged the factsstated in Nos. 1 and 2 of the complaint; that they admitted the statements of the plaintiff relative to thepayment of 1,102.16 pesos made on the 15th of November, 1902, not, however, as payment of intereston the amount stated in the foregoing document, but on account of the principal, and denied that therehad been any agreement as to an extension of the time for payment and the payment of interest at therate of 15 per cent per annum as alleged in paragraph 3 of the complaint, and also denied all the otherstatements contained therein.

As a counterclaim, the defendants alleged that they had paid to the plaintiff sums which, together with theP1,102.16 acknowledged in the complaint, aggregated the total sum of P5,602.16, and that, deductingtherefrom the total sum of P2,686.58 stated in the document transcribed in the complaint, the plaintiff stillowed the defendants P2,915.58; therefore, they asked that judgment be entered absolving them, and

sentencing the plaintiff to pay them the sum of P2,915.58 with the costs.

Evidence was adduced by both parties and, upon their exhibits, together with an account book havingbeen made of record, the court below rendered judgment on the 15th of January, 1907, in favor of theplaintiff for the recovery of the sum of P5,714.44 and costs.

The defendants excepted to the above decision and moved for a new trial. This motion was overruled andwas also excepted to by them; the bill of exceptions presented by the appellants having been approved,the same was in due course submitted to this court.

The document of indebtedness inserted in the complaint states that the plaintiff left on deposit with thedefendants a given sum of money which they were jointly and severally obliged to return on a certain datefixed in the document; but that, nevertheless, when the document appearing as Exhibits 2, written in theVisayan dialect and followed by a translation into Spanish was executed, it was acknowledged, at thedate thereof, the 15th of November, 1902, that the amount deposited had not yet been returned to thecreditor, whereby he was subjected to losses and damages amounting to 830 pesos since the 20th ofJanuary, 1898, when the return was again stipulated with the further agreement that the amountdeposited should bear interest at the rate of 15 per cent per annum, from the aforesaid date of January20, and that the 1,000 pesos paid to the depositor on the 15th of May, 1900, according to the receiptissued by him to the debtors, would be included, and that the said rate of interest would obtain until thedebtors on the 20th of May, 1897, it is called a deposit consisted, and they could have accomplished thereturn agreed upon by the delivery of a sum equal to the one received by them. For this reason it must beunderstood that the debtors were lawfully authorized to make use of the amount deposited, which theyhave done, as subsequent shown when asking for an extension of the time for the return thereof,inasmuch as, acknowledging that they have subjected the letter, their creditor, to losses and damages fornot complying with what had been stipulated, and being conscious that they had used, for their own profit

and gain, the money that they received apparently as a deposit, they engaged to pay interest to thecreditor from the date named until the time when the refund should be made. Such conduct on the part ofthe debtors is unquestionable evidence that the transaction entered into between the interested partieswas not a deposit, but a real contract of loan.

Article 1767 of the Civil Code provides that

The depository can not make use of the thing deposited without the express permission of thedepositor.


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Otherwise he shall be liable for losses and damages.

Article 1768 also provides that

When the depository has permission to make use of the thing deposited, the contract loses thecharacter of a deposit and becomes a loan or bailment.

The permission shall not be presumed, and its existence must be proven.

When on one of the latter days of January, 1898, Jose Lim went to the office of the creditor asking for anextension of one year, in view of the fact the money was scare, and because neither himself nor the otherdefendant were able to return the amount deposited, for which reason he agreed to pay interest at therate of 15 per cent per annum, it was because, as a matter of fact, he did not have in his possession theamount deposited, he having made use of the same in his business and for his own profit; and thecreditor, by granting them the extension, evidently confirmed the express permission previously given touse and dispose of the amount stated as having bee deposited, which, in accordance with the loan, to allintents and purposes gratuitously, until the 20th of January, 1898, and from that dated with interest at 15per cent per annum until its full payment, deducting from the total amount of interest the sum of 1,000pesos, in accordance with the provisions of article 1173 of the Civil Code.

Notwithstanding that it does not appear that Jose Lim signed the document (Exhibit 2) executed in thepresence of three witnesses on the 15th of November, 1902, by Ceferino Domingo Lim on behalf ofhimself and the former, nevertheless, the said document has not been contested as false, either by acriminal or by a civil proceeding, nor has any doubt been cast upon the authenticity of the signatures ofthe witnesses who attested the execution of the same; and from the evidence in the case one issufficiently convinced that the said Jose Lim was perfectly aware of and authorized his joint codebtor toliquidate the interest, to pay the sum of 1,000 pesos, on account thereof, and to execute the aforesaiddocument No. 2. A true ratification of the original document of deposit was thus made, and not the leastproof is shown in the record that Jose Lim had ever paid the whole or any part of the capital stated in theoriginal document, Exhibit 1.

If the amount, together with interest claimed in the complaint, less 1,000 pesos appears as fullyestablished, such is not the case with the defendant's counterclaim for P5,602.16, because the existenceand certainty of said indebtedness imputed to the plaintiff has not been proven, and the defendants, whocall themselves creditors for the said amount have not proven in a satisfactory manner that the plaintiffhad received partial payments on account of the same; the latter alleges with good reason, that theyshould produce the receipts which he may have issued, and which he did issue whenever they paid himany money on account. The plaintiffs allegation that the two amounts of 400 and 1,200 pesos, referred toin documents marked "C" and "D" offered in evidence by the defendants, had been received fromCeferino Domingo Lim on account of other debts of his, has not been contradicted, and the fact that in theoriginal complaint the sum of 1,102.16 pesos, was expressed in lieu of 1,000 pesos, the only paymentmade on account of interest on the amount deposited according to documents No. 2 and letter "B" abovereferred to, was due to a mistake.

Moreover, for the reason above set forth it may, as a matter of course, be inferred that there was norenewal of the contract deposited converted into a loan, because, as has already been stated, thedefendants received said amount by virtue of real loan contract under the name of a deposit, since theso-called bailees were forthwith authorized to dispose of the amount deposited. This they have done, ashas been clearly shown.

The original joint obligation contracted by the defendant debtor still exists, and it has not been shown orproven in the proceedings that the creditor had released Joe Lim from complying with his obligation inorder that he should not be sued for or sentenced to pay the amount of capital and interest together withhis codebtor, Ceferino Domingo Lim, because the record offers satisfactory evidence against the


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pretension of Jose Lim, and it further appears that document No. 2 was executed by the other debtor,Ceferino Domingo Lim, for himself and on behalf of Jose Lim; and it has also been proven that Jose Lim,being fully aware that his debt had not yet been settled, took steps to secure an extension of the time forpayment, and consented to pay interest in return for the concession requested from the creditor.

In view of the foregoing, and adopting the findings in the judgment appealed from, it is our opinion that the

same should be and is hereby affirmed with the costs of this instance against the appellant, provided thatthe interest agreed upon shall be paid until the complete liquidation of the debt. So ordered.

Arellano, C.J., Carson, Willard and Tracey, JJ., concur.

G.R. No. L-7097 October 23, 1912

VICENTE DELGADO, defendant-appellee,vs.PEDRO BONNEVIE and FRANCISCO ARANDEZ, plaintiffs-appellants.

O' Brien and DeWitt, and A. V. Herrero, for appellants.Roco and Roco, for appellee.

ARELLANO,C.J.:

When Pedro Bonnevie and Francisco Arandez formed in Nueva Caceres, Ambos Camarines, aregular general partnership for engaging in the business of threshing paddy, Vicente Delgado undertookto deliver to them paddy for this purpose to be cleaned and returned to him as rice, with the agreement ofpayment them 10 centimos for each cavan and to have returned in the rice one-half the amount receivedas paddy. The paddy received for this purpose was credited by receipts made out in this way: "Receipt for(number) cavanes of paddy in favor of (owner of the paddy), Nueva Caceres, (day) of (month), 1898."

And they issued to Vicente Delgado receipts Nos. 86-99 for a total of 2,003 cavanes and a half of paddy,

from April 9 to June 8, 1898.

On February 6, 1909, Vicente Delgado appeared in the Court of First Instance of AmbosCamarines with said receipts, demanding return of the said 2,003 and a half cavanes of paddy, or in theabsence thereof, of the price of said article at the rate of 3 pesos the cavan of 6,009 pesos and50 centimos , with the interest thereon at 6 percent a year reckoning from, November 21, 905, untilcomplete payment, and the costs. The plaintiff asked that the interest run from November 21, 1905,because on that date his counsel demanded of the defendants, Bonnevie and Arandez, their partnershiphaving been dissolved, that they settle the accounts in this matter.

The court decided the case by sentencing the defendant, Pedro Bonnevie and Francisco Arandez,to pay to Vicente Delgado two thousand seven hundred and fifty-four pesos and 81 centimos (2,754.81),the value of 2,003 cavanes of paddy at the rate of 11 reales the cavan and 6 percent interest on saidsum reckoned from November 21, 1905, and the costs.

On appeal to this Supreme Court, the only grounds of error assigned are: (1) Violation of articles532 and 950 of the Code of Commerce; (2) violation of articles 309 of the Code of Commerce and 1955and 1962 of the Civil Code; and (3) violation of section 296 of the Code of Civil Procedure.

With reference to the first assignment of error it is alleged that the receipts in question, the formwhereof has been set forth, were all issued before July 11, 1898, and being credit paper as defined in


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paragraph 2 of article 532 of the Code of Commerce, the right of action arising therefrom prescribedbefore July 11, 1901, in accordance with article 950 of the Code of Commerce.

This conclusion is not admissible. It is true that, according to the article 950 of the Code ofCommerce, actions arising from bills of exchange, drafts, notes, checks, securities, dividends, coupons,and the amounts of the amortization of obligations issued in accordance with said code, shall extinguish

three years after they have fallen due; but it is also true that as the receipts in question are not documentsof any kinds enumerated in said article, the actions arising therefrom do not extinguish three years fromtheir date (that, after all, they do not fall due). It is true that paragraph 2 of article 950 also mentions,besides those already stated, "other instruments of draft or exchange;" but it is also true that the receiptsin this case are not documents of draft or exchange, they are not drafts payable to order , but they are, asthe appellants acknowledge, simple promises to pay, or rather mere documents evidencing the receipt ofsome cavanes of paddy for the purpose already stated, which is nothing more than purely for industrial,and not for mercantile exchange. They are documents such as would be issued by the thousand so-called rice-mills scattered throughout the Islands, wherein a few poor women of the people in like mannerclean the paddy by pounding it with a pestle and return hulled rice. The contract whereby one personreceives from another a quantity of unhulled rice to return it hulled, for a fixed compensation orrenumeration, is an industrial, not a commercial act; it is, as the appellant say, a hire of services withoutmercantile character, for there is nothing about the operation of washing clothes. Articles 532 and 950 ofthe Code of Commerce have not, therefore, been violated, for they are not applicable to the case at bar.

Neither are articles 309 of the Code of Commerce and 1955 and 1962 of the Civil Code applicable.The first of these articles reads thus:

Whenever, with the consent of the depositor, the depositary disposes of the articles ondeposit either for himself or for his business, or for transactions intrusted to him by the former, therights and obligations of the depositary and of the depositor shall cease, and the rules andprovisions applicable to the commercial loans, commission, or contract which took place of thedeposit shall be observed.

The appellants say that, in accordance with this legal provision, the puddy received on depositceased to continue under such character in order to remain in their possession under the contract of hire

of services, in virtue whereof they could change it by returning rice instead of paddy and a half less thanthe quantity received. They further say that the ownership of personal property, according to article 1955of the Civil Code, prescribes by uninterrupted possession for six years, without necessity of any othercondition, and in accordance with article 1962 of the same Code real actions, with regard to personalproperty, prescribe after the lapse of six years from the loss of possession. 1awphil.net

Two questions are presented in these allegations: One regarding the nature of the obligationcontracted by the appellants; and the other regarding prescription, not for a period of three years, but ofsix years.

With reference to the first, it is acknowledged that the obligation of the appellants arose primarilyout of the contract of deposit, but this deposit was later converted into a contract of hire of services, andthis is true. But it is also true that, after the object of the hire of services had been fulfilled, the rice in

every way remained as a deposit in the possession of the appellants for them to return to the depositor atany time they might be required to do so, and nothing has relieved them of this obligation; neither thedissolution of the partnership that united them, nor the revolutionary movement of a political characterthat seems to have occurred in 1898, nor the fact that they may at some time have lost possession of therice.

With reference to the second question, or under title of deposit or hire of services, the possessionof the appellants can in no way amount to prescription, for the thing received on deposit or for hire ofservices could not prescribe, since for every prescription of ownership the possession must be in the


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capacity of an owner, public, peaceful, and uninterrupted (Civil Code, 1941); and the appellants could notpossess the rice in the capacity of owners, taking for granted that the depositor or lessor never couldhave believed that he had transferred to them ownership of the thing deposited or leased, but merely thecare of the thing on deposit and the use or profit thereof; which is expressed in legal terms by saying thatthe possession of the depositary or of the lessee is not adverse to that of the depositor or lessor, whocontinues to be the owner of the thing which is merely held in trust by the depositary or lessee.

In strict law, the deposit, when it is of fungible goods received by weight, number or measurement,becomes a mutual loan, by reason of the authorization which the depositary may have from the depositorto make use of the goods deposited. (Civil Code, 1768, and Code of Commerce, 309.) .

But in the present case neither was there for authorization of the depositor nor did the depositariesintend to make use of the rice for their own consumption or profit; they were merely released from theobligation of returning the same thing and contracted in lieu thereof the obligation of delivering somethingsimilar to the half of it, being bound by no fixed terms, the opposite of what happens in a mutual loan, tomake the delivery or return when and how it might please the depositor.

In fact, it has happened that the depositaries have, with the consent of the depositor, as provided inarticle 309 of the Code of Commerce, disposed of the paddy "for transactions he intrusted to them," and

that in lieu of the deposit there has been a hire of services, which is one entered into between the partiesto the end that one should return in rice half of the quantity of paddy delivered by the other, with theobligation on the latter's part of paying 10 centimos for each cavan of hulled rice. The consequence of thisis that the rules and regulations for contract of hire of services must be applied to the case, one of whichis that the thing must be returned after the operation entrusted and payment of compensation, and theother that the action for claiming the thing leased, being personal, does not prescribe for fifteen yearsunder article 1964 of the Civil Code. 1awphi1.net

If the action arising from the receipts in question does not prescribe in three years, as does thatfrom bills of exchange, because they are not drafts payable to order or anything but receipts that anywarehouseman would sign; if the possession of the paddy on the part of those who received it forthreshing is not in the capacity of owner but only in that of depositary or lessor of services and under suchcharacter ownership thereof could not prescribe in six years, or at any time, because adverse possession

and not mere holding in trust is required prescription; if the action to recover the paddy so delivered is notreal with regard to personal property, possession whereof has been lost, but a personal obligation arisingfrom contract of lease for recovery of possession that has not been lost but maintained in the lessee inthe name of the lessor; if prescription of any kind can in no way be held, only because there could nothave been either beginning or end of a fixed period for the prescription, it is useless to talk of interruptionof the period for the prescription, to which tends the third assignment of error, wherein it is said that thecourt violated article 296 of the Code of Civil Procedure in admitting as proven facts not alleged in thecomplaint, justas if by admitting them there would have been a finding with regard to the computation ofthe period for timely exercise of the action, taking into consideration the legal interruptions of the runningof the period of prescription. The court has made no finding in the sense that this or that period of timeduring which these or those facts occured must be counted out, and therefore the action has notprescribed, because by eliminating such period of time and comparing such and such date the action hasbeen brought in due time. Prescription of three or six years cannot be presupposed in the terms alleged,but only of fifteen years, which is what is proper to oppose to the exercise of a right of action arising fromhire of services and even of deposit or mutual loan, whether common or mercantile; and such is theprescription considered possible by the trial court, in conformity with articles 943 of the Code ofCommerce and 1964 of the Civil Code.

The trial judge confined himself to sentencing the defendants to payment of the price of the paddy,ignoring the thing itself, return whereof ought to have been the subject of judgment in the first place,because the thing itself appears to have been extinguished and its price has taken its place. But theassigning of legal interest from November 21, 1905, can have no other ground than the demand made byplaintiff's counsel upon the defendants to settle this matter. Legal interest on delinquent debts can only be


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owed from the time the principal amount constitutes a clear and certain debt, and in the present case theprincipal debt has only been clear and certain since the date of the judgment of the lower court; so thelegal interest can be owed. only since then.

The judgment appealed from is affirmed, except that the legal interest shall be understood to beowed from the date thereof; with the costs of this instance against the appellants.

Torres, Mapa, Johnson and Carson, JJ., concur.

The preceding discussion disposes of all vital contentions relative to the liability of the defendant upon the causesof action stated in the complaints. We proceed therefore now to consider the question of the liability of theplaintiff Guillermo Baron upon the cross-complaint of Pablo David in case R. G. No. 26949. In this cross-action thedefendant seek, as the stated in the third paragraph of this opinion, to recover damages for the wrongful suing outof an attachment by the plaintiff and the levy of the same upon the defendant's rice mill. It appears that about twoand one-half months after said action was begun, the plaintiff, Guillermo Baron, asked for an attachment to beissued against the property of the defendant; and to procure the issuance of said writ the plaintiff made affidavitto the effect that the defendant was disposing, or attempting the plaintiff. Upon this affidavit an attachment wasissued as prayed, and on March 27, 1924, it was levied upon the defendant's rice mill, and other property, real and

personal. 1awph!l.net

Upon attaching the property the sheriff closed the mill and placed it in the care of a deputy. Operations werenot resumed until September 13, 1924, when the attachment was dissolved by an order of the court and thedefendant was permitted to resume control. At the time the attachment was levied there were, in the bodega,more than 20,000 cavans of palay belonging to persons who held receipts therefor; and in order to get this grainaway from the sheriff, twenty-four of the depositors found it necessary to submit third-party claims to the sheriff.When these claims were put in the sheriff notified the plaintiff that a bond in the amount of P50,000 must begiven, otherwise the grain would be released. The plaintiff, being unable or unwilling to give this bond, the sheriffsurrendered the palay to the claimants; but the attachment on the rice mill was maintained until September 13, asabove stated, covering a period of one hundred seventy days during which the mill was idle. The ground uponwhich the attachment was based, as set forth in the plaintiff's affidavit was that the defendant was disposing orattempting to dispose of his property for the purpose of defrauding the plaintiff. That this allegation was false isclearly apparent, and not a word of proof has been submitted in support of the assertion. On the contrary, the

defendant testified that at the time this attachment was secured he was solvent and could have paid hisindebtedness to the plaintiff if judgment had been rendered against him in ordinary course. His financial conditionswas of course well known to the plaintiff, who is his uncle. The defendant also states that he had not conveyedaway any of his property, nor had intended to do so, for the purpose of defrauding the plaintiff. We have before ustherefore a case of a baseless attachment, recklessly sued out upon a false affidavit and levied upon thedefendant's property to his great and needless damage. That the act of the plaintiff in suing out the writ waswholly unjustifiable is perhaps also indicated in the circumstance that the attachment was finally dissolved uponthe motion of the plaintiff himself.

The defendant testified that his mill was accustomed to clean from 400 to 450 cavans of palay per day,producing 225 cavans of rice of 57 kilos each. The price charged for cleaning each cavan rice was 30 centavos. Thedefendant also stated that the expense of running the mill per day was from P18 to P25, and that the net profit perday on the mill was more than P40. As the mill was not accustomed to run on Sundays and holiday, we estimate

that the defendant lost the profit that would have been earned on not less than one hundred forty work days.Figuring his profits at P40 per day, which would appear to be a conservative estimate, the actual net loss resultingfrom his failure to operate the mill during the time stated could not have been less than P5,600. Thereasonableness of these figures is also indicated in the fact that the twenty-four customers who intervened withthird-party claims took out of the camarin 20,000 cavans of palay, practically all of which, in the ordinary course ofevents, would have been milled in this plant by the defendant. And of course other grain would have found its wayto this mill if it had remained open during the one hundred forty days when it was closed.

But this is not all. When the attachment was dissolved and the mill again opened, the defendant found thathis customers had become scattered and could not be easily gotten back. So slow, indeed, was his patronage in


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returning that during the remainder of the year 1924 the defendant was able to mill scarcely more than the grainbelonging to himself and his brothers; and even after the next season opened many of his old customers did notreturn. Several of these individuals, testifying as witnesses in this case, stated that, owing to the unpleasantexperience which they had in getting back their grain from the sheriff to the mill of the defendant, though they hadpreviously had much confidence in him.

As against the defendant's proof showing the facts above stated the plaintiff submitted no evidence

whatever. We are therefore constrained to hold that the defendant was damaged by the attachment to the extentof P5,600, in profits lost by the closure of the mill, and to the extent of P1,400 for injury to the good-will of hisbusiness, making a total of P7,000. For this amount the defendant must recover judgment on his cross-complaint.

The trial court, in dismissing the defendant's cross-complaint for damages resulting from the wrongful suingout of the attachment, suggested that the closure of the rice mill was a mere act of the sheriff for which theplaintiff was not responsible and that the defendant might have been permitted by the sheriff to continue runningthe mill if he had applied to the sheriff for permission to operate it. This singular suggestion will not bear amoment's criticism. It was of course the duty of the sheriff, in levying the attachment, to take the attachedproperty into his possession, and the closure of the mill was a natural, and even necessary, consequence of theattachment. For the damage thus inflicted upon the defendant the plaintiff is undoubtedly responsible.

One feature of the cross-complaint consist in the claim of the defendant (cross-complaint) for the sum ofP20,000 as damages caused to the defendant by the false and alleged malicious statements contained in theaffidavit upon which the attachment was procured. The additional sum of P5,000 is also claimed as exemplarydamages. It is clear that with respect to these damages the cross-action cannot be maintained, for the reason thatthe affidavit in question was used in course of a legal proceeding for the purpose of obtaining a legal remedy, andit is therefore privileged. But though the affidavit is not actionable as a libelous publication, this fact in no obstacleto the maintenance of an action to recover the damage resulting from the levy of the attachment.

Before closing this opinion a word should be said upon the point raised in the first assignment of error ofPablo David as defendant in case R. G. No. 26949. In this connection it appears that the deposition of GuillermoBaron was presented in court as evidence and was admitted as an exhibit, without being actually read to the court.It is supposed in the assignment of error now under consideration that the deposition is not available as evidenceto the plaintiff because it was not actually read out in court. This connection is not well founded. It is true that insection 364 of the Code of Civil Procedure it is said that a deposition, once taken, may be read by either party andwill then be deemed the evidence of the party reading it. The use of the word "read" in this section finds itsexplanation of course in the American practice of trying cases for the most part before juries. When a case is thus

tried the actual reading of the deposition is necessary in order that the jurymen may become acquainted with itscontents. But in courts of equity, and in all courts where judges have the evidence before them for perusal at theirpleasure, it is not necessary that the deposition should be actually read when presented as evidence.

From what has been said it result that judgment of the court below must be modified with respect to theamounts recoverable by the respective plaintiffs in the two actions R. G. Nos. 26948 and 26949 and must bereversed in respect to the disposition of the cross-complaint interposed by the defendant in case R. G. No. 26949,with the following result: In case R. G. No. 26948 the plaintiff Silvestra Baron will recover of the Pablo David thesum of P6,227.24, with interest from November 21, 1923, the date of the filing of her complaint, and with costs. Incase R. G. No. 26949 the plaintiff Guillermo Baron will recover of the defendant Pablo David the sum of P8,669.75,with interest from January 9, 1924. In the same case the defendant Pablo David, as plaintiff in the cross-complaint,will recover of Guillermo Baron the sum of P7,000, without costs. So ordered.

Avancea, C.J., Johnson, Malcolm, Villamor, Romualdez and Villa-Real, JJ., concur.

G.R. No. L-7593 March 27, 1913

THE UNITED STATES, plaintiff-appellee,vs.JOSE M. IGPUARA, defendant-appellant.

W. A. Kincaid, Thos. L. Hartigan, and Jose Robles Lahesa for appellant.Office of the Solicitor-General Harvey for appellee.


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ARELLANO,C.J.:

The defendant therein is charged with the crime of estafa , for having swindled Juana Montilla andEugenio Veraguth out of P2,498 Philippine currency, which he had take on deposit from the former to beat the latter's disposal. The document setting forth the obligation reads:

We hold at the disposal of Eugenio Veraguth the sum of two thousand four hundred and ninety-eightpesos (P2,498), the balance from Juana Montilla's sugar. Iloilo, June 26, 1911, Jose Igpuara, forRamirez and Co.

The Court of First Instance of Iloilo sentenced the defendant to two years of presidio correccional , to payJuana Montilla P2,498 Philippine currency, and in case of insolvency to subsidiary imprisonment at P2.50per day, not to exceed one-third of the principal penalty, and the costs.

The defendant appealed, alleging as errors: (1) Holding that the document executed by him was acertificate of deposit; (2) holding the existence of a deposit, without precedent transfer or delivery of theP2,498; and (3) classifying the facts in the case as the crime of estafa .

A deposit is constituted from the time a person receives a thing belonging to another with theobligation of keeping and returning it. (Art. 1758, Civil Code.)

That the defendant received P2,498 is a fact proven. The defendant drew up a document declaring thatthey remained in his possession, which he could not have said had he not received them. They remainedin his possession, surely in no other sense than to take care of them, for they remained has no otherpurpose. They remained in the defendant's possession at the disposal of Veraguth; but on August 23 ofthe same year Veraguth demanded for him through a notarial instrument restitution of them, and to datehe has not restored them.

The appellant says: "Juana Montilla's agent voluntarily accepted the sum of P2,498 in an instrumentpayable on demand, and as no attempt was made to cash it until August 23, 1911, he could indorse andnegotiate it like any other commercial instrument. There is no doubt that if Veraguth accepted the receiptfor P2,498 it was because at that time he agreed with the defendant to consider the operation of sale oncommission closed, leaving the collection of said sum until later, which sum remained as a loan payableupon presentation of the receipt." (Brief, 3 and 4.)

Then, after averring the true facts: (1) that a sales commission was precedent; (2) that this commissionwas settled with a balance of P2,498 in favor of the principal, Juana Montilla; and (3) that this balanceremained in the possession of the defendant, who drew up an instrument payable on demand, he hasdrawn two conclusions, both erroneous: One, that the instrument drawn up in the form ofa deposit certificate could be indorsed or negotiated like any other commercial instrument; and the other,that the sum of P2,498 remained in defendant's possession as a loan.

It is erroneous to assert that the certificate of deposit in question is negotiable like any other commercialinstrument: First, because every commercial instrument is not negotiable; and second, because only

instruments payable to order are negotiable. Hence, this instrument not being to order but to bearer, it isnot negotiable.

It is also erroneous to assert that sum of money set forth in said certificate is, according to it, in thedefendant's possession as a loan. In a loan the lender transmits to the borrower the use of the thing lent,while in a deposit the use of the thing is not transmitted, but merely possession for its custody or safe-keeping.


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In order that the depositary may use or dispose oft he things deposited, the depositor's consent isrequired, and then:

The rights and obligations of the depositary and of the depositor shall cease, and the rules andprovisions applicable to commercial loans, commission, or contract which took the place of thedeposit shall be observed. (Art. 309, Code of Commerce.)

The defendant has shown no authorization whatsoever or the consent of the depositary for using ordisposing of the P2,498, which the certificate acknowledges, or any contract entered into with thedepositor to convert the deposit into a loan, commission, or other contract.

That demand was not made for restitution of the sum deposited, which could have been claimed on thesame or the next day after the certificate was signed, does not operate against the depositor, or signifyanything except the intention not to press it. Failure to claim at once or delay for sometime in demandingrestitution of the things deposited, which was immediately due, does not imply such permission to use thething deposited as would convert the deposit into a loan.

Article 408 of the Code of Commerce of 1829, previous to the one now in force, provided:

The depositary of an amount of money cannot use the amount, and if he makes use of it, he shallbe responsible for all damages that may accrue and shall respond to the depositor for the legalinterest on the amount.

Whereupon the commentators say:

In this case the deposit becomes in fact a loan, as a just punishment imposed upon him whoabuses the sacred nature of a deposit and as a means of preventing the desire of gain fromleading him into speculations that may be disastrous to the depositor, who is much better securedwhile the deposit exists when he only has a personal action for recovery.

According to article 548, No. 5, of the Penal Code, those who to the prejudice of another

appropriate or abstract for their own use money, goods, or other personal property which theymay have received as a deposit, on commission, or for administration, or for any other purposewhich produces the obligation of delivering it or returning it, and deny having received it, shallsuffer the penalty of the preceding article," which punishes such act as the crime of estafa . Thecorresponding article of the Penal Code of the Philippines in 535, No. 5.

In a decision of an appeal, September 28, 1895, the principle was laid down that: "Since he commits thecrime of estafa under article 548 of the Penal Code of Spain who to another's detriment appropriates tohimself or abstracts money or goods received on commission for delivery, the court rightly applied thisarticle to the appellant, who, to the manifest detriment of the owner or owners of the securities, since hehas not restored them, willfully and wrongfully disposed of them by appropriating them to himself or atleast diverting them from the purpose to which he was charged to devote them."

It is unquestionable that in no sense did the P2,498 which he willfully and wrongfully disposed of to thedetriments of his principal, Juana Montilla, and of the depositor, Eugenio Veraguth, belong to thedefendant.

Likewise erroneous is the construction apparently at tempted to be given to two decisions of this SupremeCourt (U. S. vs. Dominguez, 2 Phil. Rep., 580, and U. S. vs. Morales and Morco, 15 Phil. Rep., 236) asimplying that what constitutes estafa is not the disposal of money deposited, but denial of having receivedsame. In the first of said cases there was no evidence that the defendant had appropriated the graindeposited in his possession.


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On the contrary, it is entirely probable that, after the departure of the defendant from Libmanan onSeptember 20, 1898, two days after the uprising of the civil guard in Nueva Caceres, the rice wasseized by the revolutionalists and appropriated to their own uses.

In this connection it was held that failure to return the thing deposited was not sufficient, but that it wasnecessary to prove that the depositary had appropriated it to himself or diverted the deposit to his own or

another's benefit. He was accused or refusing to restore, and it was held that the code does not penalizerefusal to restore but denial of having received. So much for the crime of omission; now with reference tothe crime of commission, it was not held in that decision that appropriation or diversion of the thingdeposited would not constitute the crime of estafa .

In the second of said decisions, the accused "kept none of the proceeds of the sales. Those, such as theywere, he turned over to the owner;" and there being no proof of the appropriation, the agent could not befound guilty of the crime of estafa .

Being in accord and the merits of the case, the judgment appealed from is affirmed, with costs.

To G.R. No. L-60033 April 4, 1984

TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA SANTOS,petitioners,vs.THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY FISCAL FELIZARDO N.LOTA and CLEMENT DAVID,respondents.

MAKASIAR,Actg . C.J.: +. w ph!1

This is a petition for prohibition and injunction with a prayer for the immediate issuance of restrainingorder and/or writ of preliminary injunction filed by petitioners on March 26, 1982.

On March 31, 1982, by virtue of a court resolution issued by this Court on the same date, a temporaryrestraining order was duly issued ordering the respondents, their officers, agents, representatives and/orperson or persons acting upon their (respondents') orders or in their place or stead to refrain fromproceeding with the preliminary investigation in Case No. 8131938 of the Office of the City Fiscal ofManila (pp. 47-48, rec.). On January 24, 1983, private respondent Clement David filed a motion to liftrestraining order which was denied in the resolution of this Court dated May 18, 1983.

As can be gleaned from the above, the instant petition seeks to prohibit public respondents fromproceeding with the preliminary investigation of I.S. No. 81-31938, in which petitioners were charged byprivate respondent Clement David, with estafa and violation of Central Bank Circular No. 364 and relatedregulations regarding foreign exchange transactions principally, on the ground of lack of jurisdiction in thatthe allegations of the charged, as well as the testimony of private respondent's principal witness and theevidence through said witness, showed that petitioners' obligation is civil in nature.

For purposes of brevity, We hereby adopt the antecedent facts narrated by the Solicitor General in itsComment dated June 28,1982, as follows: t.hqw

On December 23,1981, private respondent David filed I.S. No. 81-31938 in the Office ofthe City Fiscal of Manila, which case was assigned to respondent Lota for preliminaryinvestigation (Petition, p. 8).


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In I.S. No. 81-31938, David charged petitioners (together with one Robert Marshall andthe following directors of the Nation Savings and Loan Association, Inc., namely HomeroGonzales, Juan Merino, Flavio Macasaet, Victor Gomez, Jr., Perfecto Manalac, Jaime V.Paz, Paulino B. Dionisio, and one John Doe) with estafa and violation of Central BankCircular No. 364 and related Central Bank regulations on foreign exchange transactions,allegedly committed as follows (Petition, Annex "A"): t.hqw

"From March 20, 1979 to March, 1981, David invested with the NationSavings and Loan Association, (hereinafter called NSLA) the sum ofP1,145,546.20 on nine deposits, P13,531.94 on savings accountdeposits (jointly with his sister, Denise Kuhne), US$10,000.00 on timedeposit, US$15,000.00 under a receipt and guarantee of payment andUS$50,000.00 under a receipt dated June 8, 1980 (au jointly with DeniseKuhne), that David was induced into making the aforestated investmentsby Robert Marshall an Australian national who was allegedly a closeassociate of petitioner Guingona Jr., then NSLA President, petitionerMartin, then NSLA Executive Vice-President of NSLA and petitionerSantos, then NSLA General Manager; that on March 21, 1981 N LA wasplaced under receivership by the Central Bank, so that David filed claimstherewith for his investments and those of his sister; that on July 22,1981 David received a report from the Central Bank that onlyP305,821.92 of those investments were entered in the records of NSLA;that, therefore, the respondents in I.S. No. 81-31938 misappropriated thebalance of the investments, at the same time violating Central BankCircular No. 364 and related Central Bank regulations on foreignexchange transactions; that after demands, petitioner Guingona Jr. paidonly P200,000.00, thereby reducing the amounts misappropriated toP959,078.14 and US$75,000.00."

Petitioners, Martin and Santos, filed a joint counter-affidavit (Petition, Annex' B') in whichthey stated the following. t.hqw

"That Martin became President of NSLA in March 1978 (after theresignation of Guingona, Jr.) and served as such until October 30, 1980,while Santos was General Manager up to November 1980; that becauseNSLA was urgently in need of funds and at David's insistence, hisinvestments were treated as special- accounts with interest above thelegal rate, an recorded in separate confidential documents only a portionof which were to be reported because he did not want the Australiangovernment to tax his total earnings (nor) to know his total investments;that all transactions with David were recorded except the sum ofUS$15,000.00 which was a personal loan of Santos; that David's checkfor US$50,000.00 was cleared through Guingona, Jr.'s dollar accountbecause NSLA did not have one, that a draft of US$30,000.00 wasplaced in the name of one Paz Roces because of a pending transactionwith her; that the Philippine Deposit Insurance Corporation had alreadyreimbursed David within the legal limits; that majority of the stockholdersof NSLA had filed Special Proceedings No. 82-1695 in the Court of FirstInstance to contest its (NSLA's) closure; that after NSLA was placedunder receivership, Martin executed a promissory note in David's favorand caused the transfer to him of a nine and on behalf (9 1/2) caratdiamond ring with a net value of P510,000.00; and, that the liabilities ofNSLA to David were civil in nature."


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Petitioner, Guingona, Jr., in his counter-affidavit (Petition, Annex' C') stated thefollowing:t.hqw

"That he had no hand whatsoever in the transactions between David andNSLA since he (Guingona Jr.) had resigned as NSLA president in March1978, or prior to those transactions; that he assumed a portion o; the

liabilities of NSLA to David because of the latter's insistence that heplaced his investments with NSLA because of his faith in Guingona, Jr.;that in a Promissory Note dated June 17, 1981 (Petition, Annex "D") he(Guingona, Jr.) bound himself to pay David the sums of P668.307.01 andUS$37,500.00 in stated installments; that he (Guingona, Jr.) securedpayment of those amounts with second mortgages over two (2) parcelsof land under a deed of Second Real Estate Mortgage (Petition, Annex"E") in which it was provided that the mortgage over one (1) parcel shallbe cancelled upon payment of one-half of the obligation to David; that he(Guingona, Jr.) paid P200,000.00 and tendered another P300,000.00which David refused to accept, hence, he (Guingona, Jr.) filed Civil CaseNo. Q-33865 in the Court of First Instance of Rizal at Quezon City, toeffect the release of the mortgage over one (1) of the two parcels of landconveyed to David under second mortgages."

At the inception of the preliminary investigation before respondent Lota, petitionersmoved to dismiss the charges against them for lack of jurisdiction because David's claimsallegedly comprised a purely civil obligation which was itself novated. Fiscal Lota deniedthe motion to dismiss (Petition, p. 8).

But, after the presentation of David's principal witness, petitioners filed the instant petitionbecause: (a) the production of the Promisory Notes, Banker's Acceptance, Certificates ofTime Deposits and Savings Account allegedly showed that the transactions betweenDavid and NSLA were simple loans, i.e., civil obligations on the part of NSLA which werenovated when Guingona, Jr. and Martin assumed them; and (b) David's principal witnessallegedly testified that the duplicate originals of the aforesaid instruments of indebtedness

were all on file with NSLA, contrary to David's claim that some of his investments werenot record (Petition, pp. 8-9).

Petitioners alleged that they did not exhaust available administrative remedies becauseto do so would be futile (Petition, p. 9) [pp. 153-157, rec.].

As correctly pointed out by the Solicitor General, the sole issue for resolution is whether publicrespondents acted without jurisdiction when they investigated the charges (estafa and violation of CBCircular No. 364 and related regulations regarding foreign exchange transactions) subject matter of I.S.No. 81-31938.

There is merit in the contention of the petitioners that their liability is civil in nature and therefore, publicrespondents have no jurisdiction over the charge of estafa.

A casual perusal of the December 23, 1981 affidavit. complaint filed in the Office of the City Fiscal ofManila by private respondent David against petitioners Teopisto Guingona, Jr., Antonio I. Martin andTeresita G. Santos, together with one Robert Marshall and the other directors of the Nation Savings andLoan Association, will show that from March 20, 1979 to March, 1981, private respondent David, togetherwith his sister, Denise Kuhne, invested with the Nation Savings and Loan Association the sum ofP1,145,546.20 on time deposits covered by Bankers Acceptances and Certificates of Time Deposits andthe sum of P13,531.94 on savings account deposits covered by passbook nos. 6-632 and 29-742, or a


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total of P1,159,078.14 (pp. 15-16, roc.). It appears further that private respondent David, together with hissister, made investments in the aforesaid bank in the amount of US$75,000.00 (p. 17, rec.).

Moreover, the records reveal that when the aforesaid bank was placed under receivership on March 21,1981, petitioners Guingona and Martin, upon the request of private respondent David, assumed theobligation of the bank to private respondent David by executing on June 17, 1981 a joint promissory note

in favor of private respondent acknowledging an indebtedness of Pl,336,614.02 and US$75,000.00 (p. 80,rec.). This promissory note was based on the statement of account as of June 30, 1981 prepared by theprivate respondent (p. 81, rec.). The amount of indebtedness assumed appears to be bigger than theoriginal claim because of the added interest and the inclusion of other deposits of private respondent'ssister in the amount of P116,613.20.

Thereafter, or on July 17, 1981, petitioners Guingona and Martin agreed to divide the said indebtedness,and petitioner Guingona executed another promissory note antedated to June 17, 1981 whereby hepersonally acknowledged an indebtedness of P668,307.01 (1/2 of P1,336,614.02) and US$37,500.00 (1/2of US$75,000.00) in favor of private respondent (p. 25, rec.). The aforesaid promissory notes wereexecuted as a result of deposits made by Clement David and Denise Kuhne with the Nation Savings andLoan Association.

Furthermore, the various pleadings and documents filed by private respondent David, before this Courtindisputably show that he has indeed invested his money on time and savings deposits with the NationSavings and Loan Association.

It must be pointed out that when private respondent David invested his money on nine. and savingsdeposits with the aforesaid bank, the contract that was perfected was a contract of simple loanor mutuum and not a contract of deposit. Thus, Article 1980 of the New Civil Code providesthat: t.hqw

Article 1980. Fixed, savings, and current deposits of-money in banks and similarinstitutions shall be governed by the provisions concerning simple loan.

In the case of Central Bank of the Philippines vs. Morfe (63 SCRA 114,119 [1975], We said: t.hqw

It should be noted that fixed, savings, and current deposits of money in banks and similarinstitutions are hat true deposits. are considered simple loans and, as such, are notpreferred credits (Art. 1980 Civil Code; In re Liquidation of Mercantile Batik of China TanTiong Tick vs. American Apothecaries Co., 66 Phil 414; Pacific Coast Biscuit Co. vs.Chinese Grocers Association 65 Phil. 375; Fletcher American National Bank vs. AngChong UM 66 PWL 385; Pacific Commercial Co. vs. American Apothecaries Co., 65 PhiL429; Gopoco Grocery vs. Pacific Coast Biscuit CO.,65 Phil. 443)."

This Court also declared in the recent case of Serrano vs. Central Bank of the Philippines (96 SCRA 102[1980]) that: t.hqw

Bank deposits are in the nature of irregular deposits. They are really 'loans because theyearn interest. All kinds of bank deposits, whether fixed, savings, or current are to betreated as loans and are to be covered by the law on loans (Art. 1980 Civil Code Gullasvs. Phil. National Bank, 62 Phil. 519). Current and saving deposits, are loans to a bankbecause it can use the same. The petitioner here in making time deposits that earninterests will respondent Overseas Bank of Manila was in reality a creditor of therespondent Bank and not a depositor. The respondent Bank was in turn a debtor ofpetitioner. Failure of the respondent Bank to honor the time deposit is failure to pay itsobligation as a debtor and not a breach of trust arising from a depositary's failure toreturn the subject matter of the deposit (Emphasis supplied).


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Hence, the relationship between the private respondent and the Nation Savings and Loan Association isthat of creditor and debtor; consequently, the ownership of the amount deposited was transmitted to theBank upon the perfection of the contract and it can make use of the amount deposited for its bankingoperations, such as to pay interests on deposits and to pay withdrawals. While the Bank has theobligation to return the amount deposited, it has, however, no obligation to return or deliver the samemoney that was deposited. And, the failure of the Bank to return the amount deposited will not constituteestafa through misappropriation punishable under Article 315, par. l(b) of the Revised Penal Code, but itwill only give rise to civil liability over which the public respondents have no- jurisdiction.

WE have already laid down the rule that: t.hqw

In order that a person can be convicted under the above-quoted provision, it mus t be proven that he has the obligation to deliver or return the some money, goods or personal property that he received Petitioners had no such obligation to return the same money,i.e., the bills or coins, which they received from private respondents. This is so becauseas clearly as stated in criminal complaints, the related civil complaints and the supportingsworn statements, the sums of money that petitioners received were loans.

The nature of simple loan is defined in Articles 1933 and 1953 of the Civil

Code. t.hqw

"Art. 1933. By the contract of loan, one of the parties delivers toanother, either something not consumable so that the latter may use thesame for a certain time- and return it, in which case the contract is calleda commodatum; or money or other consumable thing, upon the conditionthat the same amount of the same kind and quality shall he paid in whichcase the contract is simply called a loan or mutuum.

"Commodatum is essentially gratuitous.

"Simple loan may be gratuitous or with a stipulation to pay interest.

"In commodatum the bailor retains the ownership of the thing loanedwhile in simple loan, ownership passes to the borrower.

"Art. 1953. A person who receives a loan of money or any otherfungible thing acquires the ownership thereof, and is bound to pay to thecreditor an equal amount of the same kind and quality."

It can be readily noted from the above-quoted provisions that in simple loan (mutuum), ascontrasted to commodatum the borrower acquires ownership of the money, goods or

personal property borrowed Being the owner, the borrower can dispose of the thingborrowed (Article 248, Civil Code) and his act will not be considered misappropriationthereof' (Yam vs. Malik, 94 SCRA 30, 34 [1979]; Emphasis supplied).

But even granting that the failure of the bank to pay the time and savings deposits of private respondentDavid would constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code,nevertheless any incipient criminal liability was deemed avoided, because when the aforesaid bank wasplaced under receivership by the Central Bank, petitioners Guingona and Martin assumed the obligationof the bank to private respondent David, thereby resulting in the novation of the original contractualobligation arising from deposit into a contract of loan and converting the original trust relation between thebank and private respondent David into an ordinary debtor-creditor relation between the petitioners andprivate respondent. Consequently, the failure of the bank or petitioners Guingona and Martin to pay the


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deposits of private respondent would not constitute a breach of trust but would merely be a failure to paythe obligation as a debtor.

Moreover, while it is true that novation does not extinguish criminal liability, it may however, prevent therise of criminal liability as long as it occurs prior to the filing of the criminal information in court. Thus,in Gonzales vs. Serrano ( 25 SCRA 64, 69 [1968]) We held that: t.hqw

As pointed out in People vs. Nery , novation prior to the filing of the criminal information as in the case at bar may convert the relation between the parties into an ordinarycreditor-debtor relation, and place the complainant in estoppel to insist on the originaltransaction or "cast doubt on the true nature" thereof.

Again, in the latest case of Ong vs. Court of Appeals (L-58476, 124 SCRA 578, 580-581 [1983] ), thisCourt reiterated the ruling in People vs. Nery ( 10 SCRA 244 [1964] ), declaring that: t.hqw

The novation theory may perhaps apply prior to the filling of the criminal information incourt by the state prosecutors because up to that time the original trust relation may beconverted by the parties into an ordinary creditor-debtor situation, thereby placing thecomplainant in estoppel to insist on the original trust. But after the justice authorities havetaken cognizance of the crime and instituted action in court, the offended party may nolonger divest the prosecution of its power to exact the criminal liability, as distinguishedfrom the civil. The crime being an offense against the state, only the latter can renounce it(People vs. Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil. 76; U.S. vs.Montanes, 8 Phil. 620).

It may be observed in this regard that novation is not one of the means recognized by thePenal Code whereby criminal liability can be extinguished; hence, the role of novationmay only be to either prevent the rise of criminal habihty or to cast doubt on the truenature of the original basic transaction, whether or not it was such that its breach wouldnot give rise to penal responsibility, as when money loaned is made to appear as adeposit, or other similar disguise is resorted to (cf. Abeto vs. People, 90 Phil. 581; U.S.vs. Villareal, 27 Phil. 481).

In the case at bar, there is no dispute that petitioners Guingona and Martin executed a promissory noteon June 17, 1981 assuming the obligation of the bank to private respondent David; while the criminalcomplaint for estafa was filed on December 23, 1981 with the Office of the City Fiscal. Hence, it is clearthat novation occurred long before the filing of the criminal complaint with the Office of the City Fiscal.

Consequently, as aforestated, any incipient criminal liability would be avoided but there will still be a civilliability on the part of petitioners Guingona and Martin to pay the assumed obligation.

Petitioners herein were likewise charged with violation of Section 3 of Central Bank Circular No. 364 andother related regulations regarding foreign exchange transactions by accepting foreign currency depositin the amount of US$75,000.00 without authority from the Central Bank. They contend however, that theUS dollars intended by respondent David for deposit were all converted into Philippine currency beforeacceptance and deposit into Nation Savings and Loan Association.

Petitioners' contention is worthy of behelf for the following reasons:

1. It appears from the records that when respondent David was about to make a deposit of bank draftissued in his name in the amount of US$50,000.00 with the Nation Savings and Loan Association, thesame had to be cleared first and converted into Philippine currency. Accordingly, the bank draft wasendorsed by respondent David to petitioner Guingona, who in turn deposited it to his dollar account withthe Security Bank and Trust Company. Petitioner Guingona merely accommodated the request of the


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Nation Savings and loan Association in order to clear the bank draft through his dollar account becausethe bank did not have a dollar account. Immediately after the bank draft was cleared, petitioner Guingonaauthorized Nation Savings and Loan Association to withdraw the same in order to be utilized by the bankfor its operations.

2. It is safe to assume that the U.S. dollars were converted first into Philippine pesos before they were

accepted and deposited in Nation Savings and Loan Association, because the bank is presumed to havefollowed the ordinary course of the business which is to accept deposits in Philippine currency only, andthat the transaction was regular and fair, in the absence of a clear and convincing evidence to thecontrary (see paragraphs p and q, Sec. 5, Rule 131, Rules of Court).

3. Respondent David has not denied the aforesaid contention of herein petitioners despite the fact that itwas raised. in petitioners' reply filed on May 7, 1982 to private respondent's comment and in the July 27,1982 reply to public respondents' comment and reiterated in petitioners' memorandum filed on October30, 1982, thereby adding more support to the conclusion that the US$75,000.00 were really convertedinto Philippine currency before they were accepted and deposited into Nation Savings and Loan

Association. Considering that this might adversely affect his case, respondent David should havepromptly denied petitioners' allegation.

In conclusion, considering that the liability of the petitioners is purely civil in nature and that there is noclear showing that they engaged in foreign exchange transactions, We hold that the public respondentsacted without jurisdiction when they investigated the charges against the petitioners. Consequently, publicrespondents should be restrained from further proceeding with the criminal case for to allow the case tocontinue, even if the petitioners could have appealed to the Ministry of Justice, would work great injusticeto petitioners and would render meaningless the proper administration of justice.

While as a rule, the prosecution in a criminal offense cannot be the subject of prohibition and injunction,this court has recognized the resort to the extraordinary writs of prohibition and injunction in extremecases, thus: t.hqw

On the issue of whether a writ of injunction can restrain the proceedings in Criminal CaseNo. 3140, the general rule is that "ordinarily, criminal prosecution may not be blocked bycourt prohibition or injunction." Exceptions, however, are allowed in the followinginstances: t.hqw

"1. for the orderly administration of justice;

"2. to prevent the use of the strong arm of the law in an oppressive andvindictive manner;

"3. to avoid multiplicity of actions;

"4. to afford adequate protection to constitutional rights;

"5. in proper cases, because the statute relied upon is unconstitutional orwas held invalid" ( Primicias vs. Municipality of Urdaneta, Pangasinan,93 SCRA 462, 469-470 [1979]; citing Ramos vs. Torres, 25 SCRA 557[1968]; and Hernandez vs. Albano, 19 SCRA 95, 96 [1967]).

Likewise, in Lopez vs. The City Judge, et al. ( 18 SCRA 616, 621-622 [1966]), We held that: t.hqw

The writs of certiorari and prohibition, as extraordinary legal remedies, are in the ultimateanalysis, intended to annul void proceedings; to prevent the unlawful and oppressive


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exercise of legal authority and to provide for a fair and orderly administration of justice.Thus, in Yu Kong Eng vs. Trinidad , 47 Phil. 385, We took cognizance of a petition forcertiorari and prohibition although the accused in the case could have appealed in duetime from the order complained of, our action in the premises being based on the publicwelfare policy the advancement of public policy. In Dimayuga vs. Fajardo, 43 Phil. 304,We also admitted a petition to restrain the prosecution of certain chiropractors although, ifconvicted, they could have appealed. We gave due course to their petition for the orderlyadministration of justice and to avoid possible oppression by the strong arm of the law.

And in Arevalo vs. Nepomuceno , 63 Phil. 627, the petition for certiorari challenging thetrial court's action admitting an amended information was sustained despite theavailability of appeal at the proper time.

WHEREFORE, THE PETITION IS HEREBY GRANTED; THE TEMPORARY RESTRAINING ORDERPREVIOUSLY ISSUED IS MADE PERMANENT. COSTS AGAINST THE PRIVATE RESPONDENT.

SO ORDERED. 1wph1.t

Concepcion, Jr., Guerrero, De Castro and Escolin, JJ., concur.

Abad Santo

rres, Johnson and Trent, JJ., concur.

G.R. No. L-33582 March 30, 1982

THE OVERSEAS BANK OF MANILA,petitioner,vs.VICENTE CORDERO and COURT OF APPEALS, respondents.

ESCOLIN, J .:

Again, We are confronted with another case involving the Overseas Bank of Manila, filed by one of itsdepositors.

This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed the judgment of the Court of First Instance of Manila, holding petitioner bank liable to respondent VicenteCordero in the amount of P80,000.00 representing the latter's time deposit with petitioner, plus interestthereon at 6% per annum until fully paid, and costs.

On July 20, 1967, private respondent opened a one-year time deposit with petitioner bank in the amountof P80,000.00 to mature on July 20, 1968 with interest at the rate of 6% per annum. However, due to itsdistressed financial condition, petitioner was unable to pay Cordero his said time deposit together with theinterest. To enforce payment, Cordero instituted an action in the Court of First Instance of Manila.

Petitioner, in its answer, raised as special defense the finding by the Monetary Board of its state ofinsolvency. It cited the Resolution of August 1, 1968 of the Monetary Board which authorized petitioner'sboard of directors to suspend all its operations, and the Resolution of August 13, 1968 of the same Board,ordering the Superintendent of Banks to take over the assets of petitioner for purposes of liquidation.

Petitioner contended that although the Resolution of August 13, 1968 was then pending review before theSupreme Court, 1 it effectively barred or abated the action of respondent for even if judgment be


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ultimately rendered in favor of Cordero, satisfaction thereof would not be possible in view of the restrictionimposed by the Monetary Board, prohibiting petitioner from issuing manager's and cashier's checks andthe provisions of Section 85 of Rep. Act 337, otherwise known as the General Banking Act, forbidding itsdirectors and officers from making any payment out of its funds after the bank had become insolvent. Itwas further claimed that a judgment in favor of respondent would create a preference in favor of aparticular creditor to the prejudice of other creditors and/or depositors of petitioner bank.

After pre-trial, petitioner filed on November 29, 1968, a motion to dismiss, reiterating the same defensesraised in its answer. Finding the same unmeritorious, the lower court denied the motion and proceededwith the trial on the merits. In due time, the lower court rendered the aforesaid decision. Dissatisfied,petitioner appealed to the Court of Appeals, which affirmed the decision of the lower court.

Hence, this petition for review on certiorari.

The issues raised in this petition are quite novel. Petitioner stands firm on its contentions that the suit filedby respondent Cordero for recovery of his time deposit is barred or abated by the state of insolvency ofpetitioner as found by the Monetary Board of the Central Bank of the Philippines; and that the judgmentrendered in favor of respondent would in effect create a preference in his favor to the prejudice of othercreditors of the bank.

Certain supervening events, however, have rendered these issues moot and academic. The first of thesesupervening events is the letter of Julian Cordero, brother and attorney-in-fact of respondent VicenteCordero, addressed to the Commercial Bank of Manila (Combank), successor of petitioner OverseasBank of Manila. In this letter dated February 13, 1981, copy of which was furnished this Court, it appearsthat respondent Cordero had received from the Philippine Deposit Insurance Company the amount ofP10,000.00.

The second is a Manifestation by the same Julian Cordero dated July 3, 1981, acknowledging receipt ofthe sum of P73,840.00. Said Manifestation is in the nature of a quitclaim, pertinent portions of which Wequote:

I, the undersigned acting for and in behalf of my brother Vicente R. Cordero who residesin Canada and by virtue of a Special Power of Attorney issued by Vicente Romero, ourConsul General in Vancouver, Canada, xerox copy attached, do hereby manifest to thishonorable court that we have decided to waive all and any damages that may beawarded to the above-mentioned case and we hereby also agree to accept the amount ofSeventy Three Thousand Eight Hundred Forty Pesos (P73,840.00) representing theprincipal and interest as computed by the Commercial Bank of Manila. We also agree tohold free and harmless the Commercial Bank of Manila against any claim by any thirdparty or any suit that may arise against this agreement of payment.

... We also confirm receipt of Seventy Three Thousand Eight Hundred Forty Pesos(P73,840.00) with our full satisfaction. ...

When asked to comment on this Manifestation, counsel for Combank filed on August 12, 1981 aComment confirming and ratifying the same, particularly the portions which state:

We also agree to hold free and harmless the Commercial Bank any third party or any suitthat may arise against this agreement of payment, and

We also confirm receipt of Seventy Three Thousand Eight Hundred Forty Pesos(P73,840.00) with our full satisfaction.


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However, upon further examination, this Court noted the absence of the alleged special power of attorneyexecuted by private respondent in favor of Julian Cordero. When directed to produce the same, JulianCordero submitted the following explanatory Comment, to which was attached the special power ofattorney executed by respondent Vicente Cordero:

3. This manifestation (referring to the Manifestation of July 3, 1981) applies only to third

party claims, suit and other damages. It does not mean waiving the interest it should earnwhile the bank is closed and also the attorney's fees as decided by the lower court. It isvery clear. I did not waive the attorney's fees because it belongs to our attorney andinterest because it belongs to us and we are entitled to it.

Thus, with the principal claim of respondent having been satisfied, the only remaining issue to bedetermined is whether respondent is entitled to (1) interest on his time deposit during the period thatpetitioner was closed and (2) to attorney's fees.

We find the answer to be in the negative.

The pronouncement made by this Court, per Justice Barredo, in the recent case of Overseas Bank ofManila vs. Court of Appeals 2 is explicit and categorical. We quote:

It is a matter of common knowledge which we take judicial notice of, that what enables abank to pay stipulated interest on money deposited with it is that thru the other aspects ofits operation, it is able to generate funds to cover the payment of such interest. Unless abank can lend money, engage in international transactions, acquire foreclosedmortgaged properties or their proceeds and generally engage in other banking andfinancing activities, from which it can derive income, it is inconceivable how it can carryon as a depository obligated to pay stipulated interest. ... Consequently, it should bedeemed read into every contract of deposit with a bank that the obligation to pay intereston the deposit ceases the moment the operation of the bank is completely suspended bythe duly constituted authority, the Central Bank.

We consider it of trivial consequence that the stoppage of the bank's operations by theCentral Bank has been subsequently declared illegal by the Supreme Court, for beforethe Court's order, the bank had no alternative under the law than to obey the orders ofthe Central Bank. Whatever be the juridical significance of the subsequent action of theSupreme Court, the stubborn fact remained that the petitioner was totally crippled fromthen on from earning the income needed to meet its obligations to its depositors. If such asituation cannot, strictly speaking be legally denominated as "force majeure" asmaintained by private respondent, We hold it is a matter of simple equity that it be treatedas such.

And concluding, this Court stated:

Parenthetically, We may add for the guidance of those who might be concerned and sothat unnecessary litigations may be avoided from further clogging the dockets of thecourts that in the light of the consideration expounded in the above opinion, the sameformula that exempts petitioner from the payment of interest to its depositors during thewhole period of factual stoppage of its operations by orders of the Central Bank, modifiedin effect by the decision as well as the approval of a formula of rehabilitation by thisCourt, should be, as a matter of consistency, applicable or followed in respect to all otherobligations of petitioner which could not be paid during the period of its actual completeclosure.


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Neither can respondent Cordero recover attorney's fees. The trial court found that herein petitioner'srefusal to pay was not due to a wilful and dishonest refusal to comply with its obligation but to restrictionsimposed by the Central Bank. 3 Since respondent did not appeal from this decision, he is now barred fromcontesting the same.

WHEREFORE, that portion of the lower court's decision ordering petitioner to pay interest on Cordero's

time deposit is set aside. It appearing that the amount of the latter's time deposit had been fully paid, thiscase is hereby dismissed. No costs.

SO ORDERED.

G.R. No. L-17825 June 26, 1922

In the matter of the Involuntary insolvency of U. DE POLI.FELISA ROMAN, claimant-appellee,vs.ASIA BANKING CORPORATION, claimant-appellant.

Wolfson, Wolfson and Schwarzkopf and Gibbs, McDonough & Johnson for appellant. Antonio V. Herrero for appellee.

OSTRAND, J .:

This is an appeal from an order entered by the Court of First Instance of Manila in civil No. 19240, theinsolvency of Umberto de Poli, and declaring the lien claimed by the appellee Felisa Roman upon a lot ofleaf tobacco, consisting of 576 bales, and found in the possession of said insolvent, superior to thatclaimed by the appellant, the Asia Banking Corporation.

The order appealed from is based upon the following stipulation of facts:

It is hereby stipulated and agreed by and between Felisa Roman and Asia Banking Corporation,and on their behalf by their undersigned attorneys, that their respective rights, in relation to the576 bultos of tobacco mentioned in the order of this court dated April 25, 1921, be, and herebyare, submitted to the court for decision upon the following:

I. Felisa Roman claims the 576 bultos of tobacco under and by virtue of the instrument, a copy ofwhich is hereto attached and made a part hereof and marked Exhibit A.

II. That on November 25, 1920, said Felisa Roman notified the said Asia Banking Corporation ofher contention, a copy of which notification is hereto attached and made a part hereof andmarked Exhibit B.

III. That on November 29, 1920, said Asia Banking Corporation replied as per copy heretoattached and marked Exhibit C.

IV. That at the time the above entitled insolvency proceedings were filed the 576 bultos oftobacco were in possession of U. de Poli and now are in possession of the assignee.

V. That on November 18, 1920, U. de Poli, for value received, issued a quedan, coveringaforesaid 576 bultos of tobacco, to the Asia Banking Corporation as per copy of quedan attachedand marked Exhibit D.


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VI. That aforesaid 576 bultos of tobacco are part and parcel of the 2,777 bultos purchased by U.de Poli from Felisa Roman.

VII. The parties further stipulate and agree that any further evidence that either of the partiesdesire to submit shall be taken into consideration together with this stipulation.

Manila, P. I., April 28, 1921.

(Sgd.) ANTONIO V. HERRERO Attorney for Felisa Roman

(Sgd.) WOLFSON, WOLFSON & SCHWARZKOPF Attorney for Asia Banking Corp.

Exhibit A referred to in the foregoing stipulation reads:

1. Que la primera parte es duea de unos dos mil quinientos a tres mil quintales de tacabo dedistintas clases, producidos en los municipios de San Isidro, Kabiaw y Gapan adquiridos porcompra con dinero perteneciente a sus bienes parafernales, de los cuales es ella administradora.

2. Que ha convenido la venta de dichos dos mil quinientos a tres mil quintales de tabacomencionada con la Segunda Parte, cuya compraventa se regira por las condiciones siguientes:

(a ) La Primera Parte remitira a la Segunda debidamente enfardado el tabaco de que ella espropietaria en bultos no menores de cincuenta kilos, siendo de cuenta de dicha Primera Partetodos los gastos que origine dicha mercancja hasta la estacion de ferrocarril de Tutuban, en cuyolugar se hara cargo la Segunda y desde cuyo instante seran de cuenta de esta los riesgos de lamercancia.

(b) El precio en que la Primera Parte vende a la Segunda el tabaco mencionada es el deveintiseis pesos (P26), moneda filipina, por quintal, pagaderos en la forma que despues se

establece.

(c ) La Segunda Parte sera la consignataria del tabaco en esta Ciudad de Manila quien se haracargo de el cuando reciba la factura de embarque y la guia de Rentas Internas, trasladandolo asu bodega quedando en la misma en calidad de deposito hasta la fecha en que dicha SegundaParte pague el precio del mismo, siendo de cuenta de dicha Segunda Parte el pago dealmacenaje y seguro.

(d ) LLegada la ultima expedicion del tabaco, se procedera a pesar el mismo con intervencion dela Primera Parte o de un agente de ella, y conocido el numero total de quintales remitidos, sehara liquidacion del precio a cuenta del cual se pagaran quince mil pesos (P15,000), y el resto sedividira en cuatro pagares vencederos cada uno de ellos treinta dias despues del anterior pago;esto es, el primer pagare vencera a los treinta dias de la fecha en que se hayan pagado losquince mil pesos, el segundo a igual tiempo del anterior pago, y asi sucesivamente;conviniendose que el capital debido como precio del tabaco devengara un interes del diez porciento anual.

Los plazos concedidos al comprador para el pago del precio quedan sujetos a la condicionresolutoria de que si antes del vencimiento de cualquier plazo, el comprador vendiese parte deltabaco en proporcion al importe de cualquiera de los pagares que restasen por vencer, o caso deque vendiese, pues se conviene para este caso que desde el momento en que la Segunda Parte


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venda el tabaco, el deposito del mismo, como garantia del pago del precio, queda cancelado ysimultaneamente es exigible el importe de la parte por pagar.

Leido este documento por los otorgantes y encontrandolo conforme con lo por ellos convenido, lofirman la Primera Parte en el lugar de su residencia, San Isidro de Nueva Ecija, y la Segunda enesta Ciudad de Manila, en las fechas que respectivamente al pie de este documento aparecen.

(Fdos.) FELISA ROMAN VDA. DE MORENOU. DE POLI

Firmado en presencia de:

(Fdos.) ANTONIO V. HERREROT. BARRETTO

("Acknowledged before Notary")

Exhibit D is a warehouse receipt issued by the warehouse of U. de Poli for 576 bales of tobacco. The firstparagraph of the receipt reads as follows:

Quedan depositados en estos almacenes por orden del Sr. U. de Poli la cantidad de quinientossetenta y seis fardos de tabaco en rama segun marcas detalladas al margen, y con arreglo a lascondiciones siguientes:

In the left margin of the face of the receipts, U. de Poli certifies that he is the sole owner of themerchandise therein described. The receipt is endorced in blank "Umberto de Poli;" it is not marked "non-negotiable" or "not negotiable."

Exhibit B and C referred to in the stipulation are not material to the issues and do not appear in theprinted record.

Though Exhibit A in its paragraph ( c ) states that the tobacco should remain in the warehouse of U. de Polias a deposit until the price was paid, it appears clearly from the language of the exhibit as a whole that itevidences a contract of sale and the recitals in order of the Court of First Instance, dated January 18,1921, which form part of the printed record, show that De Poli received from Felisa Roman, under thiscontract, 2,777 bales of tobacco of the total value of

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